Where are the Cheap Firms Internationally?

Where are the Cheap Firms Internationally?

February 4, 2015 Value Investing Research

Last updated on March 15th, 2015 at 04:58 pm

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Last week, Wes had a short post entitled, Where are the Cheap Firms?

The post showed that when we look at the cheapest stocks in the U.S. stock market, we see that a few industries predominate today, notably energy (mostly oil-related) and consumer discretionary.

We wondered what things looked like in developed international markets, but at a country level. That is, when we look at the cheapest stocks available worldwide, in which countries will we find the cheapest stocks?

First, what does the universe look like? We examine 1035 securities that are deep and liquid in the developed markets:



It is worth noting that Japan has many more tradeable stocks than many of these other countries.

Country weigths based on stock-selection using EBIT/TEV:



Norway, with a 6% weight, actually has a higher EBIT/EV yield (at 20.22%) in its cheapest decile than Japan (at 14.69%), it has many fewer stocks, and so receives a lower allocation versus Japan’s 55% weight. In general, the world’s cheap stocks reside in Japan.


How about another valuation metric? P/E:



A different story here: Japan has a huge weight, but Hong Kong plays a much bigger role.

What is “cheap” depends on how you define cheapness. However, some interesting bargain hunting can be found in Japan, Norway, and Hong Kong.

Good luck!

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About the Author

David Foulke

Mr. Foulke is currently an owner/manager at Tradingfront, Inc., a white-label robo advisor platform. Previously he was a Managing Member of Alpha Architect, a quantitative asset manager. Prior to joining Alpha Architect, he was a Senior Vice President at Pardee Resources Company, a manager of natural resource assets, including investments in mineral rights, timber and renewables. He has also worked in investment banking and capital markets roles within the financial services industry, including at Houlihan Lokey, GE Capital, and Burnham Financial. He also founded two technology companies: E-lingo.com, an internet-based provider of automated translation services, and Stonelocator.com, an online wholesaler of stone and tile. Mr. Foulke received an M.B.A. from The Wharton School of the University of Pennsylvania, and an A.B. from Dartmouth College.